With the United States imposing capital gain tax ranging from 20% to 37% on cryptocurrencies, investors and crypto traders are moving to Puerto Rico, a Caribbean island and unincorporated territory of the United States.
With a population of just 3.2 million, the island has been very user-friendly to all crypto investors and if you spend 183 days each year, you’re free of taxes on capital gains.
Not only that, if you have a firm that exports its services from Puerto Rico for example, a crypto consultant, you only pay a paltry 4% corporate tax rate.
The tax exemption for digital assets is only available to taxpayers who relocate to the territory and meet certain criteria for moving to an island city.
Benefits island provides
While speaking to CNBC, crypto entrepreneur and investor David Johnston who moved with his family to Puerto Rico in March 2021 said, there were huge tax breaks for any person who spends 183 days. Even while holding an American passport, I don’t have to pay any taxes on capital gains.
Puerto Rico has fast become the new hot destination for the crypto sector. Facebook whistleblower Frances Haugen recently said that she bought crypto and moved from San Francisco to Puerto Rico last year to hang out with her crypto friends on the island.
NFT investor Logan Paul has also set up shop there, along with crypto billionaire Brock Pierce, a child actor of Mighty Ducks.
There are buildings that are filled with startups and crypto companies. Naming a few, Johnston said companies funding crypto projects, Pantera Capital and NFT.com, Redwood City Ventures have an office on the island.
Act 60 has become a big puller, as everyone wants to grab a piece of land it seems, he adds.
Moving is easy
To move to an island, a person doesn’t need a visa or apply for residency. You just need to buy a domestic flight ticket, get a driving license, buy a house and open an office in any part of San Juan. The process is very smooth, Johnston explained.
However, you do need to pay the attorney’s fees to get things done properly as per the procedure laid down by the authorities.
Legal angle
According to the Association of International Certified Professional Accountants (AICPA), “Eligible persons can obtain a 100% tax exemption, lasting until the end of 2035, from Puerto Rican income taxes on dividends, interest, and capital gains accrued after becoming a bona fide resident of Puerto Rico. Gains generated from . . . digital assets based on blockchain technology are eligible, among other asset categories.”
“Certain conditions must be met to qualify, including a requirement to make annual contributions of at least $10,000 to not-for-profit organizations operating in Puerto Rico and acquisition of residential real property within two years of the start of incentives,” AICPA adds.
“Act 60 that Puerto Rico has every intention to maintain for taxpayers seeking to relocate to Puerto Rico until at least 2035/2036 is not an absolute right. The Puerto Rico government can still modify or eliminate the program, even after a taxpayer has qualified,” as per Sean M. Golding of Golding & Golding, International Tax Lawyers.
Puerto Rico is attracting crypto investors, but this tax benefit is only valid for the next 13 to 14 years, which can be a problem later on, but until then, it is a place to save your taxes and enjoy the hospitality of the island with complete peace from tax officials.
